What's the best way to save for college?

Let's face it: We would do anything for our children. That means making sure they have the best opportunities available to them, including a great undergraduate experience. But with soaring college costs and a general uncertainty about how much and how to save, it can be difficult to get started with your college savings plan—or, if you've already started, to know if you're on track.

Here are steps to help you put a college savings plan in place

How much should I save?

Our College Savings Calculator asks 5 simple questions to help you create a customized estimate for your college costs. One thing to keep in mind—you can always borrow for college, but you can't borrow for retirement. Avoid dipping into your retirement savings to fund a college education. That money is meant to help safeguard your financial future, and once it's gone, you can't get it back.

While thinking about savings, it's also important to have a realistic college planning talk with your child. That means aligning your child’s college choice—and the costs involved —with his or her job goals, market opportunities, and likely starting salary. It's important for both you and your child to:

Estimate total college costs

Consider future student debt burden

Balance those against future salary potential

This kind of planning can impact your "how much to save" discussions—before you jump into the "how to."

How should I save?

While there are different types of plans available for college savings, the 529 college savings plan is a tax-advantaged account that may be a good fit for your financial situation. Why? It offers fewer restrictions than other plans (no income or age limits; you can invest in any state’s plan), and you can set up regular, automatic contributions.

While parents are often the account holders, interested grandparents or family members and friends can also open a 529 (some plans offer gifting options, too). The annual gift limit is $14,000 per year, but with a 529 plan you can give $70,000 per beneficiary in a single year and treat it as if you were giving that lump sum over a 5-year period.1

You can invest in a 529 plan from any state and use that money at colleges across the country. Be sure to research your own state's plan for potential benefits, including in-state tax benefits.

Here are some of the other perks of a 529 to keep in mind:

Tax benefits

Money invested in the account grows tax-deferred and qualified higher education expenses are federal income tax-free.

Cover more than tuition

You can also use 529 funds to pay for room and board, books, and computers.2

Flexibility

529 funds can be used for qualified higher ed expenses at any eligible institution and may be transferred to any eligible family member of the original beneficiary.

Investment choices

529 plans offer a range of investments to help you meet your goals.

Take the next step: Start a college savings plan

Invest in a child's future today. 529 plans are flexible, tax-advantaged, and the funds can be used at eligible schools nationwide.

An accelerated transfer to a 529 plan (for a given beneficiary) of $75,000 (or $150,000 combined for spouses who gift split) will not result in federal transfer tax or use of any portion of the applicable federal transfer tax exemption and/or credit amounts if no further annual exclusion gifts and/or generation-skipping transfers to the same beneficiary are made over the five-year period and if the transfer is reported as a series of five equal annual transfers on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. If the donor dies within the five-year period, a portion of the transferred amount will be included in the donor's estate for estate tax purposes.

2. See a Fact Kit for a list of qualified higher education expenses, as defined in section 529 of the Internal Revenue Code.

The UNIQUE College Investing Plan, U.Fund College Investing Plan, Delaware College Investment Plan, and Fidelity Arizona College Savings Plan are offered by the state of New Hampshire, MEFA, the state of Delaware, and the Arizona Commission for Postsecondary Education, respectively, and managed by Fidelity Investments. If you or the designated beneficiary is not a New Hampshire, Massachusetts, Delaware, or Arizona resident, you may want to consider, before investing, whether your state or the beneficiary's home state offers its residents a plan with alternate state tax advantages or other state benefits such as financial aid, scholarship funds and protection from creditors.

Units of the portfolios are municipal securities and may be subject to market volatility and fluctuation.

Please carefully consider the plan's investment objectives, risks, charges, and expenses before investing. For this and other information on any 529 college savings plan managed by Fidelity, contact Fidelity for a free Fact Kit, or view one online. Read it carefully before you invest or send money.

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